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Sometimes the overall performance of an MNC may already be insulated by offsetting effects between subsidiaries,...

Sometimes the overall performance of an MNC may already be insulated by offsetting effects between subsidiaries, and it may not be necessary to hedge the position of each individual subsidiary.​ a. ​False b. ​True

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Answer #1

True

A multinational company must identify the individual net transaction exposure on a currency basis. The net exposure must be identified by reviewing the consolidation of subsidiary positions. So one subsidiary may have receivables in a particular currency while the other may have payables in that currency.

Suppose this currency appreciate it will be favourable to the first subsidiary and unfavourable to the other. Hence in this case the overall performance of the company may already be insulated and it may not be required to hedge the position of individual subsidiaries.

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